Tuesday, January 27, 2009

Necessary Evil

The path to becoming a successful trader is filled with what I call necessary evils.  I believe that traders learn best by learning from their mistakes.  Too often new traders have unrealistic expectations.  They think that they will never experience a trading slump or difficult patch of trading.  When they start to slump they are not mentally prepared to deal with the stresses associated with difficult trading.  At Trading RM, we talk about accepting the fact that all traders will struggle from time to time.  It is very important to know that trading is filled with many ups and downs.  The most successful traders know how to deal with these setbacks.  The acceptance makes it easier to deal with the struggles and allows the trader to focus on the learning process.  Each of us needs to know what to do when a slump sets in.  First, cut the amount of capital you trade.  Next, make an effort to take something positive from the experience.  It is often helpful to talk to other traders.  Make an effort to get back to the basics, the things that made you successful in the first place.  When I am in a trading slump, I remind myself that I have been here before and I will  be there again.  Then I take a deep breath and begin to  work on my trading skills.